England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CARDIFF MERCANTILE COURT
(His Honour Judge Chambers QC)

		Royal Courts of Justice Strand London, WC2
		9th April 2003

9th, Wednesday April 2003

J U D G M E N T
1. LORD JUSTICE MAY: This is an appeal by the claimants against a judgment of His Honour Judge Chambers QC given at Chester Civil Justice Centre on 28th August 2002. The consequent order is dated 19th November 2002. The case was, in fact, proceeding in the Cardiff Mercantile Court. The judge refused permission to appeal. Permission was subsequently granted by Potter LJ. The judge had acceded to an application by the defendants under Part 24 of the Civil Procedure Rules for summary judgment against the claimant. He ordered the claim to be struck out, subject to the claimant's right to apply to amend the particulars of claim. An amendment has since been applied for and allowed, in the end without opposition, so the matter will proceed to trial whatever the outcome of this appeal.
2. An application under Part 24 against a claimant normally has to show that the claimant has no real prospect of succeeding on the claim, and that there is no other compelling reason why the case should be disposed of at a trial. Although the court proceeding under Part 24 is able to address questions both of fact and law, the object of Part 24 does not include the judge conducting a mini trial: see Lord Woolf in Swain v Hillman [2001] 1 All ER page 91.
3. The defendant, Welsh Rugby Union Ltd, is a body which organises and controls the sport of rugby union in Wales. The claimants, Aberavon & Port Talbot Rugby Football Club Ltd, are a prominent Welsh rugby club and a member of and affiliated to the WRU. Each of the claimants and the defendants are, to put it loosely, the limited company successors of former unincorporated associations. The defendant was incorporated in 1998 to meet the emerging needs of professional rugby. No doubt the claimants incorporated at approximately the same time. On 6th April 1997, a date critical to these proceedings, they had yet to incorporate. Aberavon were a member of the WRU, contractually bound by its Constitution and By-laws.
4. At the end of the 2000/2001 season Aberavon were placed first in the First Division of the Welsh Rugby Union National League. In previous seasons this would have entitled them to promotion to the Premier League, which comprised the Celtic League and the Welsh Scottish League. They were not, however, promoted. This was because the WRU had changed the arrangements for promotion in or about August 2000. The change had been made because of a reorganisation of the structure of the Premier League competitions which involved the reduction by two of the number of Welsh clubs participating in those leagues. To achieve this two clubs had to be relegated and, of importance to Aberavon, there was no promotion from Division 1.
5. Aberavon's basic claim, as it eventually emerged, is that they were contractually entitled to be promoted. They derived that entitlement from what they say occurred at a Special General Meeting of the WRU at St David's Hall, Cardiff on 6th April 1997. There is a dispute as to exactly what happened and was said on that occasion. Since the judge was hearing a summary judgment application, he had to assume, without deciding, that the claimant's version of events was correct and capable of being established. Their case was that Mr Cobner, the then Director of Rugby for the WRU, gave an assurance that the WRU would give 12 months' notice to the member clubs of any future changes in the League structure. The context of the assurance was the consideration of a resolution to reduce the number of clubs in the Premier Division from 12 to eight.
6. Aberavon's case is that they expended much energy and, more importantly for present purposes, expense in a campaign to achieve promotion to the Premier League by coming first in Division 1, which they succeeded in doing. The conditions of modern professional rugby mean that this could only be done over a period of time, so that proper notice was, in all fairness, required. Since promotion occurs at the end of a season, their case interprets 12 months' notice as meaning 12 months before the start of the season at the end of which promotion would otherwise take effect.
7. Each party filed a large body of written evidence. Much of it concerned questions of contentious fact plainly not suitable for determination on a summary judgment application. The judge, correctly in my view, did not attempt to consider such questions in any detail. The claimant's case, which he did consider, was that at the meeting of 6th April 1997 the members bound themselves to a contract which both carried the motion into effect and gave legal force to Mr Cobner's undertaking. This contract became part of an umbrella contract under which the WRU had bound itself to operate, and this was carried forward so as to bind what later became the defendant company. The judge understood that he was invited to treat the motion at the meeting as having been amended and that an amended motion was agreed to, to the effect that thereafter 12 months' notice would be given by the WRU to the member clubs of any changes in the League structure. The judge did not accept submissions to the effect that there arose a freestanding contractual obligation independently of the WRU's Constitution and By-laws. Either Mr Cobner's declaration achieved binding force within the unincorporated WRU's constitutional framework or, without further implementation, it was nothing.
8. The judge considered the provisions of the Constitution and By-laws. Those of direct relevance are, first, clause 9, which reads as follows:

"The Secretary shall convene a Special General Meeting, if at any time he receives a requisition to that effect, signed by the Chairman and Secretaries of not fewer than ten Clubs within 21 days of receipt of the said requisition.

The Committee shall have power at any time to convene a Special General Meeting for the transaction of such business as it considers necessary or expedient in the interests of the Union, including proposals for the revision of:

(a) The Constitution and By-laws of the Union.

(b) The By-laws, Regulations relating to the Game and Laws of the Game of the International Board.

Fourteen clear days' notice shall be given to all Clubs of the date, place and time of a Special General Meeting and of the business proposed to be transacted thereat."

9. Clause 12 concerns powers of the Committee and provides in part as follows:

"(a)(i) The Committee shall transact and control the whole of the affairs of the Union except, in the selection of the International and Trial Teams and such matters as are specifically referred to the Annual General Meeting.

(ii) Submit amendments to the Constitution and By-Laws in accordance with By-Law 25.

(iii) make regulations and pass resolutions which shall be binding on all Clubs and members thereof, referees and coaches."

10. The judge said of this clause that the powers of the Committee were therefore very considerable but that what the Committee could not do was to change the Constitution and By-laws. This, as it was then understood, could only be done under By-law 34, which provides as follows:

"ALTERATION OF CONSTITUTION AND BY-LAWS

The consent of two-thirds of those present and voting at the Annual General Meeting or where alterations have been proposed by the Committee in accordance with By-Law 9 at a Special General Meeting shall be necessary before this Constitution and By-Laws or the By-Law Regulations relating to the Game and Law of the Game, of the International Board can be amended or rescinded. No alteration in a By-Law of the Board, or Regulation relating to the Game or Law of the Game can be put into operation before the approval of the International Board has been obtained."

11. It was initially perhaps thought that the Constitution and By-laws could only be altered under clause 34 at an Annual General Meeting. But closer reading of the clause indicates that this could happen either at an Annual General Meeting or at a Special General Meeting under clause 9, but for either the requirement of a two-thirds majority applies.
12. The judge's decision was then in these terms:

"What Aberavon says is that by the end of the meeting a situation had been arrived at in which it was not possible for the Committee to make any change in the League structure without 12 months notice, until such time as the member clubs might pass a resolution that relieved it of that obligation. The necessary implication of this contention is that the meeting had effected a change to the Constitution an By-Laws because the effect of the contention is that the powers conferred upon the Committee by By-Law 12 had been limited in the manner suggested. I cannot see how this could have been done in the informal fashion described. The Committee had no power to bind its discretion for the indefinite future. The member clubs had no power to achieve with an informality operating outwith By-Law 34 and enjoying neither notice nor formal working, a measure that changed their association's constitutional framework."

13. The judge therefore allowed the application and made the order which he did. As I have said, the judge has since allowed an application to amend the particulars of claim.
14. The original claim was that Aberavon were entitled to be promoted. They were not so entitled under the structure which had been put in place in August 2000, but that structure was, according to their case, illegitimate because the WRU, through Mr Cobner, had undertaken not to change the structure other than on 12 months' notice, and such notice had not been given.
15. The claim which was the subject of the judge's decision was that contained in the reply, which he treated as a claim for damages for breach of Mr Cobner's assurance on the basis that it was contractually binding. The alternative claim now pleaded in the amended particulars is that it was an implied term of the contract between the WRU and the member clubs that the defendant would not act capriciously or arbitrarily in changing the structure relating to promotion. The defendants are said to have been in breach of this implied term in particulars which relate Aberavon's case based on Mr Cobner's assurance. It is accepted that this is a viable cause of action which, absent compromise, requires a trial. In these circumstances, I consider that this court should limit its decision to the question whether Judge Chambers was right to decide the short point which he did decide summarily against Aberavon.
16. Aberavon's grounds of appeal are:

(1) The judge failed to apply the proper test under Part 24 of the Civil Procedure Rules.

(2) His decision was unjust because the judgment was made on a ground upon which Aberavon had not had any opportunity to make representations.

(3) The judge made an error of law in construing the Constitution and By-laws of the WRU.

17. As to the second of these grounds, we are told that the judge was handed a copy of the WRU's Constitution and By-laws, as they were in 1997, towards the end of the oral hearing. Each party was given the opportunity to make written submissions relating to them. The defendant made short written submissions dated 29th July 2002 which referred only to clause 9. The claimant made written submissions in answer which did not address clauses 12 and 34. Yet the judge's decision turned on an analysis of those two clauses. I am sympathetic in general terms to this ground of appeal, but, as it is pointed out by Mr Wyn Williams QC, on behalf of the defendants, and accepted by Mr Mr Timothy Young QC on behalf of Aberavon, the essential question is whether the judge's conclusion was right or wrong.
18. As to the first ground of appeal, it is submitted that the judge made his decision on a difficult question of construction of the Constitution and By-laws of an unincorporated association without any reference to whether there were arguments to the contrary that had a real prospect of success or not. The judge should not have addressed this question without a proper factual investigation into the context of Mr Cobner's assurance and the particular circumstances of the Special General Meeting of the WRU at which it was given. A factual investigation was necessary, and this could only be done at a trial.
19. In support of the third ground of appeal, Mr Young submits that, on a proper construction of the Constitution and By-laws, the assurance by Mr Cobner did not involve a change to the Constitution and By-laws at all and therefore did not require the formality to which the judge referred. He submits, alternatively, that even if the judge's construction were correct, the Committee was able to limit its discretion in the way in which according to Aberavon's case it did. In written submissions, Mr Young submitted that at the time of the assurance given by Mr Cobner the WRU was an unincorporated association having no legal entity. The relationship between its members was contractual and was contained in, or to be implied from, the Constitution and By-laws. However, he submitted that the relationship must not be construed in the same way as an ordinary contract and that the contract between the members is not contained exclusively in the Constitution and By-laws. He refers to a number of authorities. From The Satanita, Clarke v Dunraven [1897] AC 59 he derives the proposition that competition rules can constitute binding contracts. He refers to a number of authorities to the effect that analogous sporting bodies regulating significant national activity in a monopolistic manner have been held to enter into contractual arrangements with competitors allowing private law remedies in damages. The cases to which he has referred are R v Disciplinary Committee of the Jockey Club, ex parte Aga Khan [1993] 2 All ER 853 at 860, relying on Law v National Greyhound Racing Club Ltd [1983] 1 WLR 1302 and at 864 relying on R v Football Association, ex parte Football League Ltd [1993] 2 All ER 833.
20. Mr Young submits that professional sport is now of commercial significance and that it is wrong to pretend that it can still be run in the same way as amateur sport used to be run. He submits that the rules of WRU should not be interpreted literally, according to the very letter, but should be given a reasonable interpretation which accords with what, in the court's view, they must have been intended to mean. For these propositions he refers to British Equity Actors' Association v Goring [1977] ICR 393 at 396 G and Jacques v Amalgamated Union of Engineering Works [1987] 1 All ER 621 at 627. The approach to meetings of an unincorporated sporting association should not become unrealistically formal. For this he refers to In re GKN Sports Club [1982] 1 WLR 774 at 776.
21. Based upon these general submissions, Mr Young submits that the judge was wrong to decide that the assurance given by Mr Cobner necessarily involved an amendment to the Constitution and By-laws. It would be extraordinary if it did. Any commitment of the Committee could be unilaterally varied at any time, simply on the basis that they were not authorised to give such a commitment. This, he submits, demonstrates by itself that there ought to be a full trial. The power of the Committee was a power "to transact and control the whole of the affairs of the union". The judge's construction, he submits, gives the Committee absolute power, without fetter and discretion at all times. By-law 12 should rather be seen as defining the responsibility of the Committee at a more basic level. He submits that the right to promotion is a fundamental and defining right of sporting leagues and must in the context be a contractual right. There is no inconsistency between a contractual undertaking to give 12 months' notice of any change relating to league structure and the power given to the Committee by By-law 12. What the Committee did by giving the assurance was itself expressly an act within their power to transact and control the affairs of the union.
22. The question to be decided on the defendant's application is whether there is a real prospect of success of Aberavon establishing that the assurance given by Mr Cobner was an alteration to the Constitution and By-laws of the WRU or, if not, a binding undertaking which could not be abrogated without due formality. This is a difficult question of construction not appropriate for determination under Part 24. There needs to be evidence at a trial of the surrounding circumstances before any such decision can properly be made.
23. Mr Young further submits that even if the assurance given by Mr Cobner was required to take effect as an amendment to the Constitution and By-laws, the judge placed undue emphasis on the requirement of formality by reference to By-law 34. The formalities included notice of the proposed change and an express written motion or amendment to it.
24. It is submitted that this is not how a Special General Meeting of the WRU would in practice have operated and is totally unrealistic. The Special General Meeting of April 1997 was duly called. It was not necessary for the motion under which the assurance arose to be formally amended for the assurance to take effect contractually. There is no reason why a member club's right to promotion should not be founded in something that happened at the Special General Meeting, even if it was not recorded in the minutes. The judge's decision was unrealistic and failed to take account of the way in which unincorporated associations' meetings operate.
25. In his oral submissions this morning Mr Young summarised and expanded upon those submissions. His essential submissions were these. You have to construe the Constitution bearing in mind the underlying stratum of understanding which he refers to as "the umbrella contract", which is an amalgam of the Constitution and By-laws, resolutions which have been duly passed and contractual understandings or undertakings. Those understandings are generally capable of being contractual without being part of the Constitution. They can apply to a notice provision which is capable of having great practical importance. It cannot properly be said that there is no prospect of success of establishing this after evidence. It is necessary to look at the reasons for not inserting it into a constitution. There was no change to the Constitution, nor to the way in which the WRU operated, according to the evidence of Mr Cobner. It was just a continuance of existing previous practice. Mr Cobner's assurance was, says Mr Young, intended to have some impact. The defendant's case has to be that the assurance could never have had any effect. This was an assurance for which there was consideration, if only because, as a result of it, the clubs voted in favour of the resolution that was before the Special General Meeting. Accordingly, the basic ingredients of a contractual entitlement were there.
26. The assurance could also, he submits, if necessary, serve as an estoppel, capable of operating as a defence to a claim for damages for breach of an entitlement to promotion. The defence to that claim is that the rules had changed and the assurance was capable of operating in response to that defence as a kind of estoppel. He submits that the motion at the April 1997 meeting did not have to go to an annual general meeting under clause 34; and you would not expect, he says, to see a 12-month notice provision in the Constitution when the Committee is given the wide powers of management that it has under clause 12. The assurance was capable of taking effect as a result of the Special General Meeting. It could equally be abrogated or changed at a subsequent Special General Meeting. He submits that in order properly to understand the way in which the WRU worked, the court needs more factual material. A factual matrix is necessary to understand the way in which the business was done, including the level of informality. There ought, therefore, to be a trial before any decision on this point was reached. Part 24 is not, he submits, an appropriate vehicle for this determination. The conclusions are not inevitable as a matter of law whatever the evidence.
27. Mr Wyn Williams submits that the judge's decision was correct, for the reasons which he gave. The defendants further, by a Respondent's Notice, seek to uphold the judge's decision on grounds which he did not cover. These, in summary, are that:

(1) any assurance did not survive the subsequent incorporation of the defendants, a separate legal entity;

(2) events subsequent to 6th April 1997 establish that the defendant and its member have never conducted themselves on the basis that a contract existed, such as is contended for by Aberavon; and.

(3) a resolution of 24th May 1998 had the effect of discharging the agreement said to have been made on 6th April 1997, if indeed it was so made.

28. The judge did not consider or decide any of these matters. I do not consider that it is appropriate for this court to do so. I think that they all probably involve an evidential investigation which has yet to be undertaken. The second of them certainly does. It no doubt will need to be undertaken upon the amended case. Their investigation is not necessary in the light of the view that I take of the issue which the judge did decide.
29. As to that issue, Mr Wyn Williams submits that Aberavon have to establish that those present at the Special General Meeting had reached an agreement which was intended to have legal effect and be binding on all member clubs of the WRU. He points to the terms of clause 12. Under it the general Committee have unfettered power if they resolve to do something positive that is within their power. But if it is resolved to limit the powers of the Committee, that can only be done by amending the Constitution. This could have been done by a resolution with the requisite two-thirds majority, but an assurance recorded in the minutes short of a resolution would be of no effect, because the 12 months' notice provision can only be construed as limiting the power of the Committee. There was no resolution proposed or passed at the special general meeting to that effect, and without it there could be no contractually binding commitment which had the effect of cutting down the powers of the Committee under clause 12.
30. Mr Young counters this by submitting that it is not a matter which should be decided summarily under Part 24. Evidence would show how this unincorporated association of unincorporated associations conducted its business, and might support his submission that contractually binding commitments were capable of existing outside the terms of the Constitution and formal resolutions. I accept for the purpose of argument only that this may be possible in some respects. But it is not possible, in my judgment, in matters such as that with which the court is now concerned, which ought to be formally decided, and not in matters which in logic can only operate as changes to the Constitution. This, in my judgment, was one such, and I consider that the judge reached the correct conclusion.
31. I would dismiss the appeal.
32. I add that this decision does not preclude Aberavon from pursuing their amended claim, nor does it preclude the WRU from defending it on the basis of matters raised in their Respondent's Notice.
33. LORD JUSTICE LAWS: I agree that this appeal should be dismissed for all the reasons given by my Lord. I agree also with his observations relating to the future conduct of this case upon the amended basis.

Order: Appeal dismissed with costs, the costs of the Respondent's Notice should not be excluded from those costs.